US Dollar Gains as Expectations of Rate Cuts Cool
The US dollar is on track for a weekly gain, supported by recent economic data and comments from Federal Reserve officials that have tempered expectations of rapid interest rate cuts. The University of Michigan’s preliminary reading on the consumer sentiment index for this month came in at 78.8, the highest since July 2021. This positive data follows strong labor market and retail sales figures earlier in the week, indicating a resilient economy.
Fed officials have also been pushing back on market expectations of aggressive rate cuts. Chicago Fed President Austan Goolsbee stated that more inflation data is needed before any decision can be made to lower interest rates. According to CME’s FedWatch Tool, the probability of a rate cut in March stands at 53.2%, down from 55.5% previously.
The dollar index, which measures the greenback against a basket of currencies, is up 0.08% at 103.43, set for its sixth consecutive day of gains and a 0.9% increase for the week.
Euro and Yen Weaken Against the Dollar
The euro is slightly up against the dollar at $1.0875 but has declined nearly 0.7% for the week. J.P.Morgan has revised its expectations for an interest rate cut by the European Central Bank to June instead of September but remains cautious about inflation and wage growth trends.
Meanwhile, the yen has weakened by 0.12% against the greenback to 148.33 per dollar. The Bank of Japan is expected to maintain its ultra-loose monetary policy during its upcoming policy meeting.
Pound Falls as UK Retail Sales Decline
Sterling is trading at $1.267, down 0.29% for the day, following data that revealed a significant slump in UK retail sales in December, marking the largest decline in three years.
Bitcoin Continues Decline After ETF Approval
In the cryptocurrency market, bitcoin has declined by 0.48% to $40,864.88. This marks its second consecutive week of losses as investors take profits following the approval of spot bitcoin exchange-traded funds in the US.
Hot Take: US Dollar Strengthens Amidst Economic Data and Fed Comments
The US dollar has advanced this week, buoyed by positive economic data and remarks from Federal Reserve officials that have tempered expectations of interest rate cuts. The University of Michigan’s consumer sentiment index showed improvement, while strong labor market and retail sales figures also contributed to a positive outlook for the economy.
Fed officials have been pushing back on expectations of aggressive rate cuts, emphasizing the need for more inflation data before making any decisions. This has resulted in a decline in market expectations of a rate cut in March.
Meanwhile, the euro and yen have weakened against the dollar, while sterling has fallen due to disappointing UK retail sales data. In the cryptocurrency market, bitcoin has experienced a decline following the approval of spot bitcoin exchange-traded funds.
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